The AFL-CIO and United Steelworkers held a rally outside the Indiana Statehouse in protest of the Carrier job losses on April 29, 2016.(Photo: Mykal McEldowney/IndyStar 2016 file photo)
INDIANAPOLIS — Carrier Corp.'s decision to keep hundreds of jobs in Indianapolis had more to do with federal contracts than state incentives, sources familiar with the deal told The Indianapolis Star.
Carrier is maintaining its Indianapolis operations largely because of the business interests of its parent company, United Technologies Corp., said John Mutz, an Indiana Economic Development Corp. board member. Mutz, who was briefed on the state's offer to Carrier, said United Technologies "wants to make sure they maintain a favorable relationship" with the incoming Trump administration.
"This is an enormous company with all kinds of subsidiaries that do government work, and I am sure they want to keep it," Mutz said.
Mutz's comments shed the first light on Carrier's agreement with President-elect Donald Trump to keep its Indianapolis plant open nearly nine months after announcing it would relocate 1,400 jobs to Mexico. Carrier and Trump on Tuesday confirmed a deal to save "close to 1,000 jobs."
Mutz declined to provide details but said the offer is in line with packages given to other companies.
United Technologies receives about $5.6 billion a year in federal money, or about 10% of its overall revenue. That business gave the company most of the motivation it needed to smooth relations with Trump after he spent months criticizing the company on the campaign trail.
"Carrier wants to stay in good graces with the federal government," another source with knowledge of the negotiations said. "Finalizing this deal was a show of good faith."
The source said Vice President-elect Mike Pence, who is still governor of Indiana, and his state commerce secretary, Victor Smith, had been in discussions with Carrier for weeks. In what the source described as a "carrot and stick" approach, Trump entered the negotiations later to discuss the company's relationship with the federal government.
Pence made an unsuccessful attempt to persuade Carrier to stay before joining Trump's presidential campaign. Since then, Trump and other politicians have blasted Carrier in speeches and interviews. Trump promised to persuade Carrier to change its plan and threatened to punish it with a 35% tariff if it didn't.
“We had an election. That’s what changed," Mutz said. "Whether you like it or not, Donald Trump’s approach to this kind of stuff is much different than Barack Obama’s. The guy who wrote this book, The Art of the Deal, says, 'I’m a better negotiator, and I’m going to lay down the law.' "
Although the Pence administration brought some financial incentives to the table, Mutz said they would be in line with what the state has offered the company in the past.
In 2013, well before the layoff announcement, the state had approved Carrier for $200,000 in grants to train at least 500 employees. In exchange, the company agreed to retain 1,450 jobs and invest $16 million to add “next generation HVAC units” to its product line at its Indianapolis plant.
The state also approved an affiliated company, United Technologies Electronic Controls, or UTEC, for up to $300,000 in grants in 2015 to train at least 750 employees. In exchange, the company agreed to add 116 jobs, maintain 786 jobs and spend $3.4 million to add a product line at its Huntington plant.
United Technologies also had received grants in previous years.
After Carrier's February announcement that it would relocate to Mexico, and at the urging of Pence, the company refunded $380,000 in training grants to the state in April. The state also revoked the most recent $300,000 grant.
Carrier also repaid the city of Indianapolis $1.2 million for tax breaks it had received. The city, which has already received the money, has no plans to consider new incentives for Carrier, said Taylor Schaffer, a spokeswoman for Mayor Joe Hogsett.
"I think our focus will always be on new jobs for Indianapolis residents," Schaffer said.
Follow James Briggs on Twitter: @JamesEBriggs
Follow Tony Cook on Twitter: @indystartony